41 percent of troll-spawned suits now involve patents on how to run your business.

Some of the patents that have generated the most outrage in recent years are patents that make claims about everyday business practices: using online shopping carts, scanning documents to e-mail, tracking a vehicle, or using online ads to pay for content.

Using a gift card? Finding real estate online? Automatic online bidding? All have been patented, and all by so-called "patent trolls" with no business other than suing over their patents.

Defenders of current patent law tend to portray these situations as outliers. But trolls asserting patents on business practices is increasingly becoming the norm. That's the finding of a new study (PDF) on business method patents published today by PatentFreedom, a defense-oriented patent analytics company. The study focused only on business method patents asserted by trolls, which PatentFreedom more diplomatically calls non-practicing entities, or NPEs.

To conduct the study, PatentFreedom first had to sift through the database it maintains of more than 3,700 patents that have been litigated by NPEs. It isolated a set of 1,990 patents that had some type of indicator that they might be business method patents—for example, fitting into certain "classes" in the US Patent Office's classification system. Then it did a manual review of those patents to find 954 patents that fit the definition of business method patents—that is, they claim methods used in "the practice, administration, or management of an enterprise, the processing of financial data, or the determination of the charge for goods and services."

The study produced several notable findings.

First, lawsuits over business method patents are becoming more common. Such lawsuits are growing in general, and they're growing when measured as a proportion of all NPE litigation. The number of companies facing business method patent lawsuits brought by NPEs has grown at 28 percent per year since 2004. While NPE lawsuits in general have grown during that time, business method lawsuits have grown faster. The share of NPE lawsuits that involve business method patents went from 27 percent in 2005-06 to 41 percent in 2011-12.

PatentFreedom 2013

Business method patents are mostly used against non-tech companies. It's no surprise that this is the year that retailers, supermarkets, and restaurants have started pushing for patent reform. Of the troll suits brought against retailers in 2005-06, 27 percent were on business method patents. By 2011-12, a majority (51 percent) of the suits were based on business method patents.

PatentFreedom

Business method patents are increasingly being used against small and medium-sized companies. In 2012, companies with less than $100 million in annual revenue faced 43 percent of all NPE business method litigation.

PatentFreedom

Texas is the most popular venue for trolls to pull out their business method patents. East Texas has been a legendary locale for patent-holders for some years now, but this study shows that it seems to be particularly receptive to these types of patents on business practices. In Texas, 52 percent of NPE litigation involved business method patents. In Delaware, 41 percent did, whereas in California, only 26 percent of NPE suits were over business methods.

PatentFreedom

Business method patents are already getting special attention. There's a special review process for some business method patents at the Patent Office now as a result of the America Invents Act. Some patent reform advocates believe that the review process should be expanded, and there is proposed legislation to do so.

One thing that has always struck me about PatentFreedom is the company's elegant and sensible definition of what a "non-practicing entity," or troll, really is. The company's definition of an NPE is "any entity that earns, or plans to earn, the majority of its revenue from enforcing patents." That's really the only definition that makes sense. It emphasizes the true innovation of trolling, which is the invulnerability to counter-suit. Emphasizing whether or not an inventor is involved, as some have, has always seemed like an irrelevant distraction. The PatentFreedom definition dispenses with other distracting arguments, like the idea that universities are NPEs. None of that is to say that universities or operating companies can't abuse the patent system in other ways, as they certainly can.

"Our definition actually includes my great-grandfather, who was an inventor," said PatentFreedom President Chris Reohr, who spoke with Ars about the results of the study. "One of his patents clearly is a business method patent. I have no objection to someone who invests time and money and takes some risk trying to use a patent. I think it's the nature of the conduct which can sometimes be reprehensible."

Reohr is steadfastly neutral on the patent debate, never using the word "troll" and seeing his role as an information provider to PatentFreedom clients. However, the finding that business method patents are increasingly being used to attack small companies was striking to him. He acknowledged that the increase in litigation against small companies "really gets me angry sometimes."

If one excludes NPE litigation, patent litigation would have been essentially flat since 2004, notes Reohr. And now there does seem to be a shift in exposure to business method patents, he said.

I believe lawsuits will slow down for business method patents. There just hasn't been enough time to see the effects. The new AIA law post-grant review process will start to have an effect on business method litigation. http://www.patentspostgrant.com/lang/en ... ady-ending

But Apple and Microsoft make money off those patents (for now) and so we can't actually have reasonable patent laws! Not until every last thing is patented in the US and Microsoft and Apple actually start to lose money. After all, if government organizations can just bully patent trolls out of suing them what does the US government care for sanity as long as it's getting bribed?

Got to be one of the most depressing articles I've read in a long time. How the hell Business Practice patents (or, as we laymen call them, IDEAS) got past judicial scrutiny is baffling.

One can only hope that his kind of report will get to someone in Congress who can get something done. Yes - I still have hope that they will eventually implode and some kind of reborn and functioning version will result...

There's another duplication. The sentence before the one Kestrel quoted says "PatentFreedom President Chris Reohr spoke to Ars about the findings in his company's study" (5th to last paragraph). Two paragraphs later, Reohr is introduced again.

Does anyone still doubt that patent trolls are the rats gnawing at the foundations of the economy, and that left unchecked the entire structure will collapse on itself?

I don't think the structure will collapse on itself.

What I think more likely is that it adds more pressure to small and midsized businesses such as we see with the scan-to-email patent troll(s). The big and megacorps can pay off the trolls or afford to fight. SMBs can't afford to fight, may not even get legal advice, so they end up paying the scum or folding their business.

Edit: in short, the SMBs will disappear even more quickly than they already are.

The trolls are getting cocky. By going after the financial services, supermarkets and retail they signed their own death warrant. These industries are not going to put up with it, and likely have enough clout to push for a change in the law. And if politicians can be seen to stand up for small to medium sized businesses they will not think twice (Joe the plumber, anyone?).

We will only start to heal from this leeching of the economy by going back to the roots of the patent office: patent a THING, not an IDEA. If you can't patent an idea by itself, 90% of these NPEs would disappear overnight. The test could be as simple as: if you can choose between a patent and a copyright, then you should be ineligible for a patent.

Does anyone still doubt that patent trolls are the rats gnawing at the foundations of the economy, and that left unchecked the entire structure will collapse on itself?

Focusing on the NPE is a red herring distracting everyone from the real problem. Crap patents are being granted across the board and then being abused by everyone. Just fixating on one class of abuser isn't really going to solve anything.

Poor patent quality is the only reason that the trolls here (narrowly defined) even have anything to work with.

I give you a scenerio where patent litigation needs to happen. You heard of these invention websites, where you submit your idea and they help you patent and market. Many of these outfits will evaluate and then sell your idea without your permissions to big companies. Before you submit your patents, the big companies already got the leg up and have a product launching and patent submission fully prepared and submitted.

This is why these patent litigation has to exist, typically the filing process is where the ideas are being spied on.

Most of these suits are settled for small claims but the big firms already beat you to market. So most inventors simply have the idea but never get a chance to market.

41 percent of troll-spawned suits now involve patents on how to run your business.

The problem with that statistic is the vast magority of patent negotiations happen in secret. They usually only go to court if somebody thinks they can get the patent invalidated or that they aren't infringing.

So we are only really comparing these business patents to other dodgy patents - not to all patents as a whole.

What we really need, in my opinion, is a proper investigation. Somebody needs to force a significant sample of corporations who own patents to reveal actual numbers (perhaps anonymously) on how many patent license deals they have, for how much money, and what "category" of patents.

It needs to happen, how can lawmakers "fix" patents when everything about them is done in secret?

I used to think we should abolish all patents, but now I think there isn't enough information available to know what should be done.

Does anyone still doubt that patent trolls are the rats gnawing at the foundations of the economy, and that left unchecked the entire structure will collapse on itself?

That seems like a self correcting problem - the rats will surely be squashed when the foundation collapses...

Kind of sucks for the home owner, though.

Yes, the demise of the patent troll will be comforting knowledge when I'm bludgeoning someone to death with the can of creamed corn that the two of us were fighting over. Oh, it's getting dark; better get back to the sewer before the marauding gangs start roaming the streets. They mostly come out at night... mostly.

But Apple and Microsoft make money off those patents (for now) and so we can't actually have reasonable patent laws! Not until every last thing is patented in the US and Microsoft and Apple actually start to lose money. After all, if government organizations can just bully patent trolls out of suing them what does the US government care for sanity as long as it's getting bribed?

Apple defends themselves in court with a brand new patent troll case every few days - and that doesn't even include cases where they decide not to try and defend themselves:

And yet, the CEO of each company feel patents are a good idea. Their only public complaint (that I know of) is when standards essential patents are used to force excessive royalty rates, and governments worldwide are shutting that behaviour down.

I used to think we should abolish all patents, but now I think there isn't enough information available to know what should be done.

Patents have a right and proper place. If we didn't have patents, then every time a "little guy" has an idea and tries to market it, then the megacorps would just take it over and start producing the idea themselves with no remuneration to the inventor.

The result of that is all methods end up being held secret or ideas just never come to market. Patents are an incentive to disclose methods so that we can improve upon them and knowledge isn't lost.

There's nothing right with a too-low bar being set with patents or what I call "parts box patents"... i.e. just take a couple of parts or concepts, put them together and say "invention". But removing them altogether just enables a different breed of scum.

Does anyone still doubt that patent trolls are the rats gnawing at the foundations of the economy, and that left unchecked the entire structure will collapse on itself?

Focusing on the NPE is a red herring distracting everyone from the real problem. Crap patents are being granted across the board and then being abused by everyone. Just fixating on one class of abuser isn't really going to solve anything.

Poor patent quality is the only reason that the trolls here (narrowly defined) even have anything to work with.

Yes. There's nothing the matter with good patents being owned by non-practicing entities. Let's say someone develops a better cell phone antenna. Under what logic does it make any difference to the cost/benefit analysis of patents if the antenna is manufactured by the inventor or by a company licensed by the inventor?

Frankly, if you require practicing entities, then all you do is reduce the incentive for a person/company who is not currently in an industry, but might have an excellent idea for an invention, to put in the effort to bring that invention to fruition. No one would ever tinker in their garage again.

EDIT: And that all ignores the fact that sometimes patented inventions get incorporated into larger items. What if the hypothetical new cell phone antenna only works if it (or some component of it) is etched directly onto the baseband chip? How would an inventor ever be the actual manufacturer of that? They've got to build their own fab?

The one that gets me is the bank that's advertising a 24 hour grace period for overdrawing your account during which they won't charge you overdraft fees. (Or at least they won't charge you some type of fees related to being overdrawn, I don't recall all the details.) They end their ad with "patent pending on the 24 hour grace method". So essentially they're trying to patent *not* doing something: in this case charging their customers a fee when their account balance dips below zero for less than 24 hours.

I realize there's likely more to it than that. I'm sure the patent application is many page long. Nonetheless, even thinking that "let's not charge people if their account balance is negative less than 24 hours" is patent-worthy is ridiculous.

Does anyone still doubt that patent trolls are the rats gnawing at the foundations of the economy, and that left unchecked the entire structure will collapse on itself?

Focusing on the NPE is a red herring distracting everyone from the real problem. Crap patents are being granted across the board and then being abused by everyone. Just fixating on one class of abuser isn't really going to solve anything.

Poor patent quality is the only reason that the trolls here (narrowly defined) even have anything to work with.

Exactly. There is nothing wrong with patents if the idea is truly worthy of patent protection. But shitty software patents for things which are obvious need to stop. Ditto for so-called Business Process Patents... which should be under the most scrutiny because you aren't actually making anything, you're just describing a process (one which is usually pretty obvious).

Patents aren't going away, so the focus really should be on fixing the problems at the patent office. Not the last nonsense patent reform act that Obama passed, but a real examination of the criteria for granting patents (some of the criteria are so old and antiquated that you could probably patent just about anything... like a method for swinging on a swing (http://www.google.ca/patents/US6368227)

I used to think we should abolish all patents, but now I think there isn't enough information available to know what should be done.

Patents have a right and proper place. If we didn't have patents, then every time a "little guy" has an idea and tries to market it, then the megacorps would just take it over and start producing the idea themselves with no remuneration to the inventor.

There's nothing right with a too-low bar being set with patents or what I call "parts box patents"... i.e. just take a couple of parts or concepts, put them together and say "invention". But removing them altogether just enables a different breed of scum.

I agree about the bar being too low. Where I disagree is how ugly it gets when the blunt instrument of the legal system kicks in. you seem entirely too casual about this.